New budget figures set ‘Herculean task’ for Victoria’s next government

Detailed summary

Outside the pandemic, Victoria’s economic growth for this year is forecast to be the slowest since the global financial crisis.

Deteriorating state finances and a bleak economic forecast revealed in Victoria’s budget update have prompted a leading rating agency to warn that the Coalition’s promise of a cash surplus will be “very difficult” to deliver.

The challenging set of numbers, which predict cash deficits of $33.3 billion over the life of the next government and anaemic economic growth propped up by construction of new data centres, prompted economist Saul Eslake to declare budget repair a “Herculean task”.

The final budget update before the November 28 election, released on Thursday, showed a modest improvement to the state’s operating surpluses since the last fiscal report in October due to a surprise $1.3 billion dividend from WorkSafe.

Once capital spending is taken into account, Victoria’s general government sector will post annual deficits of between $7.9 billion and $9.1 billion between now and the end of June 2030 – a deterioration of $2.8 billion since the books were last done.

Revised forecasts predict Victoria’s economy to grow by just 1 per cent this financial year – down from 1.5 per cent predicted in the May state budget – and underperform budget expectations in the two following years. Economic growth is now not due to hit 2.5 per cent until 2029-30, when Victoria will be nearing the next state election.

The 2026-27 financial year is forecast to record the lowest rate of growth outside the pandemic since 2008-09, when the global financial crisis rocked world markets. Instead of a global credit crunch, Victoria’s economy is being battered by high inflation and cuts to immigration.

S&P Global Ratings lead analyst Anthony Walker said Victoria’s economy was heavily reliant on new migrants and population growth, which are both falling due to policy decisions taken in Canberra. Given these headwinds, he expressed scepticism towards the opposition’s promise to return the budget to a cash surplus by 2032.

“It’s going to be very difficult to achieve unless there’s a significant amount…

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